Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OBJECTIVE

The following discussion provides an analysis of the Company’s financial condition, cash flows and results of operations from management’s perspective and should be read in conjunction with the consolidated condensed financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and within the Company’s Annual Report on Form 10-K filed for the fiscal year ended October 1, 2022. Our objective is to also provide discussion of events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition and to offer information that provides understanding of our financial condition, cash flows and results of operations.

RESULTS OF OPERATIONS

Description of the Company

We are one of the world’s largest food companies and a recognized leader in protein. Founded in 1935 by John W. Tyson and grown under four generations of family leadership, the Company has a broad portfolio of products and brands like Tyson®, Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, Aidells®, ibp® and State Fair®. Some of the key factors influencing our business are customer demand for our products; the ability to maintain and grow relationships with customers and introduce new and innovative products to the marketplace; accessibility of international markets; market prices for our products; the cost and availability of live cattle and hogs, raw materials and feed ingredients; availability of team members to operate our production facilities; and operating efficiencies of our facilities.

We operate in four reportable segments: Beef, Pork, Chicken, and Prepared Foods. We measure segment profit as operating income (loss). International/Other primarily includes our foreign operations in Australia, China, Malaysia, Mexico, the Netherlands, South Korea and Thailand, third-party merger and integration costs and corporate overhead related to Tyson New Ventures, LLC.

Overview

General

Sales were relatively flat in the second quarter and grew 1% in the first six months of fiscal 2023 largely due to improved sales volume in our Chicken and Prepared Foods segments. We incurred an operating loss of $49 million for the second quarter of fiscal 2023 as compared to operating income of $1,156 million in the second quarter of fiscal 2022 as we experienced lower operating income across all segments. Operating income of $418 million for the first six months of fiscal 2023 was down 84% compared to the first six months of fiscal 2022 as we experienced lower operating income in our Beef, Pork and Chicken segments, partially offset by improved operating income in our Prepared Foods segment. In the second quarter of fiscal 2023, our operating income was impacted by $22 million of restructuring and related charges and $92 million of charges related to plant closures. Additionally, in the six months ended April 1, 2023, our operating income was impacted by $43 million of restructuring and related charges and benefited from $35 million of insurance proceeds net of costs, related to facility fires. Operating income in the second quarter of fiscal 2022 was impacted by $5 million of production facility fire costs, net of insurance proceeds. In the six months ended April 2, 2022, our operating income was impacted by $18 million of insurance proceeds, net of costs.

Market Environment

According to the United States Department of Agriculture, domestic protein production (beef, pork, chicken and turkey) increased approximately 1% in the second quarter of fiscal 2023 compared to the same period in fiscal 2022. All segments experienced inflation in operating costs, especially in labor and certain materials, however, the rate of inflation is starting to decrease and protein prices are beginning to level off. We continue to pursue recovery of increased input costs through pricing. Additionally, the conflict between Ukraine and Russia has led to economic sanctions against Russia and certain regions of Ukraine and Belarus. As of April 1, 2023, the impact of this conflict has not had a material direct impact on our financial performance. However, the conflict is still ongoing and there are many risks and uncertainties in relation to the conflict that are outside of our control. If the conflict escalates further or if additional countries join the conflict and additional economic sanctions are imposed, it could have a material impact on our business operations and financial performance. The Beef segment experienced reduced supply of market-ready cattle and increased live cattle costs. The Pork segment experienced sufficient supply, despite herd health challenges in the industry, and reduced live hog costs. The Chicken segment experienced increased feed ingredient and other input costs, challenging market conditions impacting sales pricing, and challenging export markets associated with Avian Influenza. The Prepared Foods segment experienced increased costs largely due to the impacts of an inflationary environment.

The Federal Reserve has increased interest rates, and it is anticipated that interest rates will continue to rise in the near term. Our direct exposure to rising interest rates is somewhat tempered given our strong liquidity position in addition to our current debt structure in which most of our borrowings have fixed interest rates. At April 1, 2023, we had $2.2 billion of liquidity and our current debt was $1.1 billion. Should we need to issue additional debt or borrow under our existing revolving credit facility, we may be exposed to higher interest rates than our current outstanding borrowings. On May 3, 2023, we entered into two new term loan facilities totaling $1.75 billion to refinance our commercial paper program and for general liquidity purposes. A more detailed description of our new term loan facilities is set forth in Part II, Item 5 of this Quarterly Report on Form 10-Q.

COVID-19

We continue to proactively monitor and respond to the evolving nature of the COVID-19 pandemic and its impact to our global business. Our ongoing COVID-19 task force was formed for the primary purposes of maintaining the health and safety of our team members, ensuring our ability to operate our processing facilities and maintaining the liquidity of our business. We have experienced and continue to experience multiple challenges related to the pandemic. The most significant challenge we face is the availability of team members to operate our production facilities as our production facilities continue to experience varying levels of absenteeism. The health and safety of our team members remains our top priority, and we continue to provide a variety of health and safety resources and services to team members and their family members. Additionally, we have experienced some challenges in our supply chain such as volatility of inputs, availability of shipping containers and port congestion. These challenges impacted our operating costs, but generally, we experienced lower direct incremental costs associated with COVID-19 in the second quarter and first six months of fiscal 2023 as compared to previous fiscal years. The long-term impacts of COVID-19 remain uncertain and will depend on future developments, including the duration and spread of potential future COVID-19 variants and the resurgence of existing COVID-19 variants, and related actions taken by federal, state and local government officials to prevent and manage disease spread, and effectively distribute and administer vaccinations, all of which contain some level of uncertainty and cannot be easily predicted.

Margins

Our total operating margin was (0.4)% in the second quarter of fiscal 2023. Operating margins by segment were as follows:

• Beef – 0.0%

• Pork – (2.3)%

• Chicken – (5.8)%

• Prepared Foods – 10.0%

Strategy

Our strategy is to sustainably feed the world with the fastest growing protein brands. We intend to achieve our strategy as we: grow our business by delivering superior value to consumers and customers; deliver fuel for growth and returns through commercial, operational and financial excellence; and sustain our Company and our world for future generations.

Beginning in fiscal 2022, we launched a new productivity program, which is designed to drive a better, faster and more agile organization that is supported by a culture of continuous improvement and faster decision-making. The execution of this program is supported by a program management office that ensures delivery of key project milestones and reports on savings achievements connected with the three pillars of the program. The first pillar is operational and functional excellence, which includes functional efficiency efforts in Finance, HR and Procurement focused on applying best practices to reduce costs. The second pillar is the use of new digital solutions like artificial intelligence and predictive analytics to drive efficiency in operations, supply chain planning, logistics and warehousing. The third pillar is automation, which will leverage automation and robotics technologies to automate difficult and higher turnover positions. We expect the productivity savings to be recognized in each of our reportable segments as they benefit from the achievements connected with the three pillars of the program. At this time, we do not anticipate costs associated with this program to be material and capital expenditures associated with automation and other activities are included in our capital expenditure expectations. We were targeting $1 billion in productivity savings by the end of fiscal 2024 relative to a fiscal 2021 cost baseline. We realized more than $700 million of productivity savings in fiscal 2022, which partially offset the impacts of inflationary market conditions, and we have surpassed our aggregate $1 billion target as of the end of the second quarter of fiscal 2023, more than a year ahead of our plan.

In the fourth quarter of fiscal 2022, the Company approved a restructuring program, the 2022 Program, which is expected to improve business performance, increase collaboration, enhance team member agility, enable faster decision-making and reduce redundancies. In conjunction with the 2022 Program, the Company is bringing together all its corporate team members from the Chicago, Downers Grove and Dakota Dunes area corporate locations to its world headquarters in Springdale, Arkansas, through a phased relocation commencing in early calendar year 2023. We recognized $22 million and $43 million of pretax charges in the three months and six months ended April 1, 2023, respectively, associated with the 2022 Program consisting of severance related costs, relocation and related costs, accelerated depreciation, contract and lease termination and professional and other fees. The Company currently anticipates the 2022 Program will result in cumulative pretax charges of approximately $271 million. As the Company continues to evaluate its business strategies and long-term growth targets, additional restructuring activities may occur. The following tables set forth the pretax impact of restructuring and related charges in the Consolidated Condensed Statements of Income and the pretax impact by our reportable segments. For further description refer to Part I, Item 1, Notes to the Consolidated Condensed Financial Statements, Note 6: Restructuring and Related Charges (in millions).

			Three Months Ended			Six Months Ended
			April 1, 2023			April 1, 2023
Cost of Sales			$	(4)		$	4
Selling, General and Administrative			26			39
Total Restructuring and related charges, pretax			$	22		$	43

			Three Months Ended						Six Months Ended						2022 Program charges to date						Total estimated
			April 1, 2023						April 1, 2023						April 1, 2023						2022 Program charges
Beef			$	8					$	13					$	29					$	67
Pork			2						4						9						24
Chicken			—						1						7						8
Prepared Foods			11						19						55						159
International/Other			1						6						9						13
Total Restructuring and related charges, pretax			$	22					$	43					$	109					$	271

Summary of Results

Sales

in millions			Three Months Ended												Six Months Ended
			April 1, 2023						April 2, 2022						April 1, 2023						April 2, 2022
Sales			$	13,133					$	13,117					$	26,393					$	26,050
Change in sales volume			3.3		%										2.1		%
Change in average sales price			(3.2)		%										(0.8)		%
Sales growth			0.1		%										1.3		%

Second quarter – Fiscal 2023 vs Fiscal 2022

• Sales Volume** – Sales were positively impacted by an increase in sales volume, which accounted for an increase of $434 million, driven by increased volumes in our Chicken and Pork segments partially offset by decreased volumes in our Beef segment due to reduced domestic availability of live cattle and in our Prepared Foods segment due to uneven foodservice recovery.

• Average Sales Price** – Sales were negatively impacted by lower average sales prices, which accounted for a decrease of $418 million, driven by reduced pricing in our Beef and Pork segments, partially offset by higher average sales prices in our Chicken and Prepared Foods segments.

Six months – Fiscal 2023 vs Fiscal 2022

• Sales Volume** – Sales were positively impacted by an increase in sales volume, which accounted for an increase of $539 million, driven by increased volumes in our Chicken and Prepared Foods segments partially offset by decreased volumes in our Pork segment as a result of balancing our supply with customer demand during a period of margin compression.

• Average Sales Price** – Sales were negatively impacted by lower average sales prices, which accounted for a decrease of $196 million, driven by reduced pricing in our Beef and Pork segments, partially offset by higher average sales prices in our Chicken and Prepared Foods segments.

Cost of Sales

in millions			Three Months Ended												Six Months Ended
			April 1, 2023						April 2, 2022						April 1, 2023						April 2, 2022
Cost of sales			$	12,606					$	11,382					$	24,898					$	22,300
Gross profit			527						1,735						1,495						3,750
Cost of sales as a percentage of sales			96.0		%				86.8		%				94.3		%				85.6		%

Second quarter – Fiscal 2023 vs Fiscal 2022

• Cost of sales increased $1,224 million. Higher sales volume increased cost of sales $373 million while higher input cost per pound increased cost of sales $851 million.

• The $851 million impact of higher input cost per pound was impacted by:

• Increase in live cattle costs of approximately $305 million in our Beef segment.

• Increase due to net derivative losses of $21 million in the second quarter of fiscal 2023, compared to net derivative gains of $86 million in the second quarter of fiscal 2022 due to our risk management activities. These amounts exclude offsetting impacts from related physical purchase transactions, which are included in the change in live cattle and hog costs and raw material and feed ingredient costs described herein.

• Increase of $92 million due to costs associated with plant closures.

• Increase of $71 million related to an increase in inventory lower of cost or net realizable value adjustments, primarily in our Chicken segment.

• Increase in raw material and other input costs of approximately $55 million in our Prepared Foods segment.

• Increase of approximately $45 million in our Chicken segment related to net increases in feed ingredient costs, growout expenses, partially offset by reduced outside meat purchases.

• Decrease in freight and transportation costs of approximately $40 million.

• Decrease in live hog costs of approximately $30 million in our Pork segment.

• Remaining increase in costs across all of our segments primarily driven by net impacts on average cost per pound from mix changes as well as the impact of the inflationary environment on our labor and other input costs, partially offset by savings from our productivity program.

• The $373 million impact of increased sales volume was primarily driven by increased volumes in our Chicken and Pork segments.

Six months – Fiscal 2023 vs Fiscal 2022

• Cost of sales increased 2,598 million. Higher sales volume increased cost of sales $462 million while higher input cost per pound increased cost of sales $2,136 million.

• The $2,136 million impact of higher input cost per pound was impacted by:

• Increase in live cattle costs of approximately $835 million in our Beef segment.

• Increase of approximately $220 million in our Chicken segment related to net increases in feed ingredient costs, growout expenses, partially offset by reduced outside meat purchases.

• Increase due to net derivative losses of $9 million in the first six months of fiscal 2023, compared to net derivative gains of $164 million in the first six months of fiscal 2022 due to our risk management activities. These amounts exclude offsetting impacts from related physical purchase transactions, which are included in the change in live cattle and hog costs and raw material and feed ingredient costs described herein.

• Increase in raw material and other input costs of approximately $105 million in our Prepared Foods segment.

• Increase of $92 million due to costs associated with plant closures.

• Increase of $85 million related to an increase in inventory lower of cost or net realizable value adjustments, primarily in our Chicken segment.

• Increase in live hog costs of approximately $25 million in our Pork segment.

• Increase of $25 million in our Chicken segment due to $7 million of costs incurred, net of insurance proceeds, for the first six months of fiscal 2023 compared to $18 million of insurance proceeds, net of costs incurred, in the first six months of fiscal 2022 related to a fire at our production facility in the fourth quarter of fiscal 2021.

• Decrease of approximately $42 million in our Beef segment from insurance proceeds related to the fire at our production facility in the fourth quarter of fiscal 2019.

• Decrease in freight and transportation costs of approximately $15 million.

• Remaining increase in costs across all of our segments primarily driven by net impacts on average cost per pound from mix changes as well as the impact of the inflationary environment on our labor and other input costs, partially offset by savings from our productivity program.

• The $462 million impact of increased sales volume was primarily driven by increased volumes in our Chicken and Prepared Foods segments.

Selling, General and Administrative

in millions			Three Months Ended												Six Months Ended
			April 1, 2023						April 2, 2022						April 1, 2023						April 2, 2022
Selling, general and administrative expense			$	576					$	579					$	1,077					$	1,139
As a percentage of sales			4.4		%				4.4		%				4.1		%				4.4		%

Second quarter – Fiscal 2023 vs Fiscal 2022

• Decrease of $3 million in selling, general and administrative was primarily driven by:

• Decrease of $55 million in employee costs primarily from incentive-based compensation.

• Decrease of $13 million in professional fees.

• Increase of $26 million in restructuring and related costs.

• Increase of $16 million in marketing, advertising and promotion expenses.

• Increase of $11 million in product donations.

• Increase of $6 million in technology related costs.

Six months – Fiscal 2023 vs Fiscal 2022

• Decrease of $62 million in selling, general and administrative was primarily driven by:

• Decrease of $111 million in employee costs primarily from incentive-based compensation.

• Decrease of $31 million in professional fees.

• Decrease of $21 million in technology related costs.

• Increase of $39 million in restructuring and related costs.

• Increase of $29 million in marketing, advertising and promotion expenses.

• Increase of $23 million in product donations.

Interest Expense

in millions			Three Months Ended												Six Months Ended
			April 1, 2023						April 2, 2022						April 1, 2023						April 2, 2022
			$	89					$	97					$	173					$	197

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

• Interest expense primarily included interest expense related to our senior notes, in addition to commitment fees incurred on our revolving credit facility. The decrease in interest expense for the three and six months ended April 1, 2023 was primarily due to the redemption of the June 2022 Senior Notes in fiscal 2022.

Other (Income) Expense, net

in millions			Three Months Ended												Six Months Ended
			April 1, 2023						April 2, 2022						April 1, 2023						April 2, 2022
Total other (income) expense, net			$	(1)					$	(25)					$	(43)					$	(77)

Second quarter and six months – Fiscal 2023

• Included $18 million of joint venture earnings and $29 million of foreign exchange gains in the first six months of fiscal 2023.

Second quarter and six months – Fiscal 2022

• Included $14 million of joint venture earnings in the second quarter of fiscal 2022. Included $22 million of production facilities fire insurance proceeds and a $37 million gain on an equity investment due to an observable price change in the first six months of fiscal 2022.

Effective Tax Rate

			Three Months Ended												Six Months Ended
			April 1, 2023						April 2, 2022						April 1, 2023						April 2, 2022
			29.4		%				23.4		%				24.7		%				21.6		%

Second quarter – Fiscal 2023 vs Fiscal 2022

• The percentage impacts of items on the effective tax rate were greater in fiscal 2023 due to the level of pretax income (loss) in fiscal 2023 compared to fiscal 2022.

• In both periods, the effective tax rates were increased due to state taxes and include the impact of various tax benefits; however, tax benefits increase the effective tax rate in a period of pretax loss and decrease the effective tax rate in a period of pretax income, resulting in a higher effective tax rate in the second quarter of fiscal 2023.

Six months – Fiscal 2023 vs Fiscal 2022

• The effective tax rates for both periods were increased by state taxes and decreased by various tax benefits.

• The effective tax rate for the first six months of fiscal 2022 includes a $36 million benefit from the remeasurement of deferred income taxes, primarily due to legislation decreasing state tax rates enacted in the first quarter of fiscal 2022.

Net Income (Loss) Attributable to Tyson

in millions, except per share data			Three Months Ended												Six Months Ended
			April 1, 2023						April 2, 2022						April 1, 2023						April 2, 2022
Net income (loss) attributable to Tyson			$	(97)					$	829					$	219					$	1,950
Net income (loss) attributable to Tyson – per diluted share			(0.28)						2.28						0.61						5.35

Second quarter – Fiscal 2023 – Net income (loss) attributable to Tyson included the following items:

• $22 million pretax, or ($0.05) per diluted share, of restructuring and related charges.

• $92 million pretax, or ($0.19) per diluted share, of charges related to plant closures.

Six months – Fiscal 2023 – Net income attributable to Tyson included the following items:

• $35 million pretax, or $0.07 per diluted share, of production facilities fire insurance proceeds, net of costs incurred.

• $43 million pretax, or ($0.09) per diluted share, of restructuring and related charges.

• $92 million pretax, or ($0.19) per diluted share, of charges related to plant closures.

Second quarter – Fiscal 2022 – Net income attributable to Tyson included the following items:

• $5 million pretax, or ($0.01) per diluted share, of production facilities fire costs, net of insurance proceeds.

Six months – Fiscal 2022 – Net income attributable to Tyson included the following items:

• $40 million pretax, or $0.09 per diluted share, of production facilities fire insurance proceeds, net of costs incurred.

• $36 million post tax, or $0.10 per diluted share, from remeasurement of net deferred tax liabilities at lower enacted state tax rates.

Segment Results

We operate in four segments: Beef, Pork, Chicken, and Prepared Foods. The following table is a summary of sales and operating income (loss), which is how we measure segment profit.

in millions			Sales
			Three Months Ended												Six Months Ended
			April 1, 2023						April 2, 2022						April 1, 2023						April 2, 2022
Beef			$	4,617					$	5,034					$	9,340					$	10,036
Pork			1,421						1,565						2,950						3,191
Chicken			4,430						4,086						8,693						7,976
Prepared Foods			2,422						2,393						4,960						4,726
International/Other			634						565						1,246						1,115
Intersegment sales			(391)						(526)						(796)						(994)
Total			$	13,133					$	13,117					$	26,393					$	26,050

in millions			Operating Income (Loss)
			Three Months Ended												Six Months Ended
			April 1, 2023						April 2, 2022						April 1, 2023						April 2, 2022
Beef			$	—					$	638					$	166					$	1,594
Pork			(33)						59						(54)						223
Chicken			(258)						198						(189)						338
Prepared Foods			241						263						499						449
International/Other			1						(2)						(4)						7
Total			$	(49)					$	1,156					$	418					$	2,611

Beef Segment Results

in millions			Three Months Ended																		Six Months Ended
			April 1, 2023						April 2, 2022						Change						April 1, 2023						April 2, 2022						Change
Sales			$	4,617					$	5,034					$	(417)					$	9,340					$	10,036					$	(696)
Sales volume change															(2.9)		%																—		%
Average sales price change															(5.4)		%																(6.9)		%
Operating income			$	—					$	638					$	(638)					$	166					$	1,594					$	(1,428)
Operating margin			—		%				12.7		%										1.8		%				15.9		%

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

• Sales Volume** - Sales volume decreased in the second quarter of fiscal 2023 driven by lower availability of live cattle. Sales volume remained flat in the first six months of fiscal 2023.

• Average Sales Price** - Average sales price decreased due to reduced export demand and softening domestic demand associated with increased supply of competing proteins in the market.

• Operating Income** - Operating income decreased due to unfavorable market conditions, including higher fed cattle costs and reduced demand for beef products, which made it difficult to pass along increased input costs. Additionally, operating income in the first six months of fiscal 2023 benefited from $42 million of insurance proceeds related to a fire at a production facility in the fourth quarter of fiscal 2019.

Pork Segment Results

in millions			Three Months Ended																		Six Months Ended
			April 1, 2023						April 2, 2022						Change						April 1, 2023						April 2, 2022						Change
Sales			$	1,421					$	1,565					$	(144)					$	2,950					$	3,191					$	(241)
Sales volume change															1.1		%																(3.2)		%
Average sales price change															(10.3)		%																(4.4)		%
Operating income (loss)			$	(33)					$	59					$	(92)					$	(54)					$	223					$	(277)
Operating margin			(2.3)		%				3.8		%										(1.8)		%				7.0		%

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

• Sales Volume** - Sales volume increased during the second quarter of fiscal 2023 due to increased availability of live hogs. Sales volume decreased in the first six months of fiscal 2023 as a result of balancing our supply with customer demand during a period of margin compression.

• Average Sales Price** - Average sales price decreased due to reduced global demand.

• Operating Income (Loss)** - Operating income decreased due to compressed pork margins and increased operating costs as a result of the inflationary market environment. Additionally, volatile market conditions resulted in net derivative gains of $25 million and $5 million in the second quarter and first six months of fiscal 2023, respectively, as compared to net derivative losses of $30 million and $15 million in the second quarter and first six months of fiscal 2022, respectively, which excludes the impacts of related physical purchase transactions.

Chicken Segment Results

in millions			Three Months Ended																		Six Months Ended
			April 1, 2023						April 2, 2022						Change						April 1, 2023						April 2, 2022						Change
Sales			$	4,430					$	4,086					$	344					$	8,693					$	7,976					$	717
Sales volume change															6.4		%																4.5		%
Average sales price change															2.0		%																4.5		%
Operating income (loss)			$	(258)					$	198					$	(456)					$	(189)					$	338					$	(527)
Operating margin			(5.8)		%				4.8		%										(2.2)		%				4.2		%

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

• Sales Volume** - Sales volume increased primarily due to improved domestic production as well as the sell-through of inventory, partially offset by strategic initiative mix impacts.

• Average Sales Price** - Average sales price increased primarily due to the effects of pricing initiatives in the second half of fiscal 2022, partially offset by challenging market conditions and the sell-through of inventory.

• Operating Income (Loss)** - Operating income decreased primarily due to the impacts of inflationary market conditions including increased supply chain and labor costs as well as operational impacts associated with strategic decisions. In the second quarter of fiscal 2023, we experienced $145 million of higher feed ingredient costs and $35 million of net derivative losses as compared to $101 million of net derivative gains in the second quarter of fiscal 2022. In the first six months of fiscal 2023, we experienced $370 million of higher feed ingredient costs and $15 million of net derivative losses as compared to $159 million of net derivative gains in the first six months of fiscal 2022. Additionally, operating income was impacted by $92 million of charges associated with plant closures and a $25 million reduction in insurance proceeds, net of costs incurred related to a fire at a production facility compared to the first six months of fiscal 2022.

Prepared Foods Segment Results

in millions			Three Months Ended																		Six Months Ended
			April 1, 2023						April 2, 2022						Change						April 1, 2023						April 2, 2022						Change
Sales			$	2,422					$	2,393					$	29					$	4,960					$	4,726					$	234
Sales volume change															(0.4)		%																0.4		%
Average sales price change															1.6		%																4.6		%
Operating income			$	241					$	263					$	(22)					$	499					$	449					$	50
Operating margin			10.0		%				11.0		%										10.1		%				9.5		%

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

• Sales Volume** – Sales volume decreased slightly in the second quarter of fiscal 2023 due to uneven foodservice recovery. Sales volume increased slightly in the first six months of fiscal 2023 due to strong retail demand and improved operational performance.

• Average Sales Price** – Average sales price increased due to the effects of revenue management in an inflationary cost environment and favorable product mix.

• Operating Income** – Operating income decreased in the second quarter of fiscal 2023 due to the impacts of inflationary market conditions, including $55 million of increased raw materials and other input costs, slightly offset by higher average sales price. Operating income increased in the first six months of fiscal 2023 due to higher average sales price offset by inflationary market conditions, including $105 million of increased raw materials and other input costs.

International/Other Results

in millions			Three Months Ended																		Six Months Ended
			April 1, 2023						April 2, 2022						Change						April 1, 2023						April 2, 2022						Change
Sales			$	634					$	565					$	69					$	1,246					$	1,115					$	131
Operating income (loss)			1						(2)						3						(4)						7						(11)

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

• Sales** – Sales increased due to volume growth as we continued to invest in our business and improved pricing in an inflationary cost environment.

• Operating Income (Loss)** – Operating income decreased for the first six months of fiscal 2023 primarily due to the impacts of global inflationary market conditions and the slower than anticipated recovery of the economy in China post COVID-19 lockdowns.

LIQUIDITY AND CAPITAL RESOURCES

Our cash needs for working capital, capital expenditures, growth opportunities, repurchases of senior notes, repayment of maturing debt, the payment of dividends and share repurchases are expected to be met with current cash on hand, cash flows provided by operating activities or short-term borrowings. Based on our current expectations, we believe our liquidity and capital resources will be sufficient to operate our business. However, we may take advantage of opportunities to generate additional liquidity or refinance existing debt through capital market transactions. The amount, nature and timing of any capital market transactions will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions.

Cash Flows from Operating Activities

in millions			Six Months Ended
			April 1, 2023						April 2, 2022
Net income			$	229					$	1,959
Non-cash items in net income:
Depreciation and amortization			620						595
Deferred income taxes			(29)						98
Other, net			191						27
Net changes in operating assets and liabilities			(242)						(1,455)
Net cash provided by operating activities			$	769					$	1,224

• The decrease in net cash provided by operating activities was primarily due to lower earnings as a result of operations, offset by lower payments for income taxes, legal accruals and annual incentive payments as well as comparative decreases in Accounts Receivable, Inventories and Accounts Payable.

Cash Flows from Investing Activities

in millions			Six Months Ended
			April 1, 2023						April 2, 2022
Additions to property, plant and equipment			$	(1,097)					$	(847)
Proceeds from sale of (purchases of) marketable securities, net			(1)						—
Acquisition, net of cash acquired			(39)						—
Acquisition of equity investments			(37)						(96)
Other, net			(2)						58
Net cash used for investing activities			$	(1,176)					$	(885)

• Additions to property, plant and equipment included spending for production growth, safety and animal well-being, new equipment, infrastructure replacements and upgrades to maintain competitive standing and position us for future opportunities.

• Capital spending for fiscal 2023 is expected to approximate $2.3 billion and includes spending for capacity expansion and utilization, automation to alleviate labor challenges and brand and product innovations.

• Acquisition, net of cash acquired for the six months ended April 1, 2023 included our 60% equity stake in Supreme Foods Processing Company, a producer and distributor of value-added and cooked chicken and beef products.

• Other, net for the first six months of fiscal 2022 primarily included insurance proceeds received related to a fire at one of our Chicken production facilities, proceeds from the disposition of assets and change in deposits for capital expenditures.

Cash Flows from Financing Activities

in millions			Six Months Ended
			April 1, 2023						April 2, 2022
Proceeds from issuance of debt			$	88					$	47
Payments on debt			(121)						(1,088)
Proceeds from issuance of commercial paper			4,773						—
Repayments of commercial paper			(4,182)						—
Purchases of Tyson Class A common stock			(332)						(511)
Dividends			(336)						(328)
Stock options exercised			8						113
Other, net			1						—
Net cash used for financing activities			$	(101)					$	(1,767)

• During the first six months of fiscal 2022, we extinguished the $1 billion outstanding balance of our senior notes due June 2022.

• During the first six months of fiscal 2023, we had net borrowings of $591 million pursuant to our commercial paper program.

• Purchases of Tyson Class A stock included:

• $300 million and $420 million of cash paid for shares repurchased pursuant to our share repurchase program during the six months ended April 1, 2023 and April 2, 2022, respectively.

• $32 million and $91 million of shares repurchased to fund certain obligations under our equity compensation programs during the six months ended April 1, 2023 and April 2, 2022, respectively.

• Dividends paid during the six months ended April 1, 2023 reflected a 4% increase to our fiscal 2022 quarterly dividend rate.

Liquidity

in millions
			Commitments Expiration Date						Facility Amount						Outstanding Letters of Credit (no draw downs)						Amount Borrowed						Amount Available at April 1, 2023
Cash and cash equivalents																											$	543
Short-term investments																											7
Revolving credit facility			September 2026						$	2,250					$	—					$	—					2,250
Commercial paper																											(593)
Total liquidity																											$	2,207

• Liquidity includes cash and cash equivalents, short-term investments and availability under our revolving credit facility, less the outstanding commercial paper balance.

• At April 1, 2023, we had current debt of $1,065 million, which we intend to pay with cash generated from our operating activities and other existing or new liquidity sources.

• The revolving credit facility supports our short-term funding needs and also serves to backstop our commercial paper program. We had no borrowings under the revolving credit facility during the six months ended April 1, 2023. Under the terms of the facility, we have the option to establish incremental commitment increases of up to $500 million if certain conditions are met.

• On May 3, 2023, we entered into two new term loan facilities totaling $1.75 billion to refinance our commercial paper program and for general corporate purposes.

• We have entered into definitive acquisition agreements expected to close in fiscal 2023 that are pending certain customary closing conditions. We expect to incur net cash outflows from investing activities in the range of $200 million to $250 million associated with the pending activity.

• We expect net interest expense to approximate $340 million for fiscal 2023.

• Our current ratio was 1.7 to 1 at April 1, 2023 and 1.8 to 1 at October 1, 2022.

• At April 1, 2023, approximately $508 million of our cash was held in the accounts of our foreign subsidiaries. Generally, we do not rely on the foreign cash as a source of funds to support our ongoing domestic liquidity needs. We manage our worldwide cash requirements by reviewing available funds among our foreign subsidiaries and the cost effectiveness with which those funds can be accessed. We intend to repatriate excess cash (net of applicable withholding taxes) not subject to regulatory requirements and to indefinitely reinvest outside of the United States the remainder of cash held by foreign subsidiaries. We do not expect the regulatory restrictions or taxes on repatriation to have a material effect on our overall liquidity, financial condition or the results of operations for the foreseeable future.

Capital Resources

Credit Facility

Cash flows from operating activities and cash on hand are our primary sources of liquidity for funding debt service, capital expenditures, dividends and share repurchases. We also have a revolving credit facility, with a committed capacity of $2.25 billion, to provide additional liquidity for working capital needs and to backstop our commercial paper program.

At April 1, 2023, amounts available for borrowing under our revolving credit facility totaled $2.25 billion before deducting amounts to backstop our commercial paper program. Our revolving credit facility is funded by a syndicate of 20 banks, with commitments ranging from $35 million to $175 million per bank.

Commercial Paper Program

Our commercial paper program provides a low-cost source of borrowing to fund general corporate purposes including working capital requirements. The maximum borrowing capacity under the commercial paper program is $1.5 billion. The maturities of the notes may vary, but may not exceed 397 days from the date of issuance. As of April 1, 2023, $593 million was outstanding under this program with maturities of less than 25 days. Our ability to access commercial paper in the future may be limited or its costs increased.

Capitalization

To monitor our credit ratings and our capacity for long-term financing, we consider various qualitative and quantitative factors. We monitor the ratio of our net debt to EBITDA as support for our long-term financing decisions. At April 1, 2023, and October 1, 2022, the ratio of our net debt to EBITDA was 2.4x and 1.3x, respectively. Refer to Part I, Item 3, EBITDA Reconciliations, for an explanation and reconciliation to comparable Generally Accepted Accounting Principles (“GAAP”) measures.

Credit Ratings

Revolving Credit Facility

Standard & Poor’s Rating Services’, a Standard & Poor’s Financial Services LLC business (“S&P”), applicable rating is “BBB+”. Moody’s Investor Service, Inc.’s (“Moody’s”) applicable rating is “Baa2”. The below table outlines the fees paid on the unused portion of the facility (“Facility Fee Rate”) and letter of credit fees and borrowings (“All-in Borrowing Spread”) that corresponds to the applicable ratings levels from S&P and Moody’s.

Ratings Level (Moody’s/S&P)			Facility Fee Rate			All-in Borrowing Spread
A2/A or above			0.070		%	0.875		%
A3/A-			0.090		%	1.000		%
Baal/BBB+ (current level)			0.100		%	1.125		%
Baa2/BBB			0.125		%	1.250		%
Baa3/BBB- or lower			0.175		%	1.375		%

In the event the rating levels fall within different levels, the applicable rate will be based upon the higher of the two Levels or, if there is more than a one-notch split between the two Levels, then the Applicable Rate will be based upon the Level that is one Level below the higher Level.

Debt Covenants

Our revolving credit facility contains affirmative and negative covenants that, among other things, may limit or restrict our ability to: create liens and encumbrances; incur debt; merge, dissolve, liquidate or consolidate; make acquisitions and investments; dispose of or transfer assets; change the nature of our business; engage in certain transactions with affiliates; and enter into hedging transactions, in each case, subject to certain qualifications and exceptions. In addition, we are required to maintain a minimum interest expense coverage ratio.

Our senior notes also contain affirmative and negative covenants that, among other things, may limit or restrict our ability to: create liens; engage in certain sale/leaseback transactions; and engage in certain consolidations, mergers and sales of assets.

We were in compliance with all debt covenants at April 1, 2023, and we expect that we will maintain compliance.

RECENTLY ISSUED/ADOPTED ACCOUNTING PRONOUNCEMENTS

Refer to the discussion of recently issued/adopted accounting pronouncements under Part I, Item 1, Notes to Consolidated Condensed Financial Statements, Note 1: Accounting Policies.

CRITICAL ACCOUNTING ESTIMATES

We consider accounting policies related to: contingent liabilities; revenue recognition; accrued self-insurance; defined benefit pension plans; impairment of long-lived assets and definite life intangibles; impairment of goodwill and indefinite life intangible assets; business combinations; and income taxes to be critical accounting estimates. These policies are summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended October 1, 2022. Refer to Part I, Item 1, Notes to Consolidated Condensed Financial Statements, Note 1: Accounting Policies, for updates to our significant accounting policies during the six months ended April 1, 2023. These critical accounting policies require us to make estimates and assumptions that affect the amounts reported in the consolidated condensed financial statements and accompanying notes.

As further described in the impairment of goodwill and indefinite life intangible assets critical accounting estimate included in our Annual Report on Form 10-K for the fiscal year ended October 1, 2022, we assess goodwill and indefinite life assets for impairment at least annually as of the first day the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Conditions existed as of the end our first quarter that required an interim assessment of goodwill for two of our International reporting units which had goodwill totaling $0.2 billion at December 31, 2022. The first quarter interim assessment was deemed necessary due to higher discount rates used in estimating the fair value of the reporting units as well as lower than anticipated operating results during the first quarter of fiscal 2023. Based on the first quarter interim assessment, we determined no impairment was necessary as the fair value of the reporting units exceeded their carrying value. Had we assumed future operating margins consistent with those realized in the first three months of the current fiscal year, both reporting units would have failed the quantitative step of the first quarter interim impairment test, which may have resulted in a goodwill impairment loss. The goodwill for these reporting units originated from acquisitions in fiscal 2019 and fiscal 2018, and we are still integrating them and investing in our international and global business strategy, in addition to managing through the temporary impacts of COVID-19. The reporting units' projected long-term operating margins included in the first quarter interim impairment test had to exceed an average of 4% to achieve breakeven results in the analysis. A hypothetical increase in the discount rates of approximately 50 basis points, with all other assumptions unchanged, at December 31, 2022, would have caused the carrying values of these reporting units to approximate their fair values. Our qualitative assessment for the second quarter did not indicate that it was more likely than not the fair value of any of our reporting units may be impaired, and as such, no quantitative goodwill test was deemed necessary; however the assessment of impairment for these reporting units continues to be sensitive to future discount rate increases and achievement of projected long-term operating margins as previously quantified.

Our impairment analysis contains inherent estimates and assumptions, many of which are outside the control of management including interest rates, cost of capital, tax rates, market EBITDA comparables and credit ratings, which could positively or negatively impact the anticipated future economic and operating conditions. The assumptions and estimates used in determining fair value require considerable judgement and are sensitive to changes in underlying assumptions. These assumptions can change in future periods as a result of overall economic conditions, including the impacts of inflationary pressures, increased interest and discount rates and global supply chain constraints, decreased market capitalization, amongst others. As a result, there can be no assurance that estimates and assumptions made for the purpose of assessing impairments will prove to be an accurate prediction of the future. Potential circumstances that could have a negative effect on the fair value of our reporting units include, but are not limited to, lower than forecasted growth rates or operating margins and changes in discount rates. A reduction in the estimated fair value of the reporting units could trigger an impairment in the future. We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of our goodwill and indefinite lived assets.

CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain information in this report constitutes forward-looking statements. These statements are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, current views and estimates of our outlook for fiscal 2023, other future economic circumstances, industry conditions in domestic and international markets, our performance and financial results (e.g., debt levels, return on invested capital, value-added product growth, capital expenditures, tax rates, access to foreign markets and dividend policy). Words such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “project,” “forecast,” “target,” “outlook,” “may,” “should,” “could,” and similar expressions, as well as statements written in the future tense, identify forward-looking statements. These forward-looking statements are subject to a number of factors and uncertainties that could cause our actual results and experiences to differ materially from anticipated results and expectations expressed in such forward-looking statements. We wish to caution readers not to place undue reliance on any forward-looking statements, which are expressly qualified in their entirety by this cautionary statement and speak only as of the date made. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Among the factors that may cause actual results and experiences to differ from anticipated results and expectations expressed in such forward-looking statements are the following: (i) the COVID-19 pandemic and associated responses thereto have had an adverse impact on our business and operations, and the extent that the COVID-19 pandemic continues to impact us will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the COVID-19 related impacts on the market, including production delays, labor shortages and increases in costs and inflation; (ii) the effectiveness of our financial excellence programs; (iii) access to foreign markets together with foreign economic conditions, including currency fluctuations, import/export restrictions and foreign politics; (iv) cyberattacks, other cyber incidents, security breaches or other disruptions of our information technology systems; (v) risks associated with our failure to consummate favorable acquisition transactions or integrate certain acquisitions’ operations; (vi) the Tyson Limited Partnership’s ability to exercise significant control over the Company; (vii) fluctuations in the cost and availability of inputs and raw materials, such as live cattle, live swine, feed grains (including corn and soybean meal) and energy; (viii) market conditions for finished products, including competition from other global and domestic food processors, supply and pricing of competing products and alternative proteins and demand for alternative proteins; (ix) outbreak of a livestock disease (such as African swine fever (ASF), avian influenza (AI) or bovine spongiform encephalopathy (BSE)), which could have an adverse effect on livestock we own, the availability of livestock we purchase, consumer perception of certain protein products or our ability to conduct our operations; (x) changes in consumer preference and diets and our ability to identify and react to consumer trends; (xi) effectiveness of advertising and marketing programs; (xii) significant marketing plan changes by large customers or loss of one or more large customers; (xiii) our ability to leverage brand value propositions; (xiv) changes in availability and relative costs of labor and contract farmers and our ability to maintain good relationships with team members, labor unions, contract farmers and independent producers providing us livestock, including as a result of our plan to relocate certain corporate team members to our world headquarters in Springdale, Arkansas; (xv) issues related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation; (xvi) the effect of climate change and any legal or regulatory response thereto; (xvii) compliance with and changes to regulations and laws (both domestic and foreign), including changes in accounting standards, tax laws, environmental laws, agricultural laws and occupational, health and safety laws; (xviii) adverse results from litigation; (xix) risks associated with leverage, including cost increases due to rising interest rates or changes in debt ratings or outlook; (xx) impairment in the carrying value of our goodwill or indefinite life intangible assets; (xxi) our participation in a multiemployer pension plan; (xxii) volatility in capital markets or interest rates; (xxiii) risks associated with our commodity purchasing activities; (xxiv) the effect of, or changes in, general economic conditions; (xxv) impacts on our operations caused by factors and forces beyond our control, such as natural disasters, fire, bioterrorism, pandemics, armed conflicts or extreme weather; (xxvi) failure to maximize or assert our intellectual property rights; (xxvii) effects related to changes in tax rates, valuation of deferred tax assets and liabilities, or tax laws and their interpretation; and (xxviii) those factors discussed within Item 1, Item 1A and Item 7 of our Annual Report on Form 10-K for the year ended October 1, 2022 and our other periodic filings with the SEC.